Construction sector grows for fifth straight month

Date: 07.11.2014

Presented by

Australia’s construction industry continued to expand for a fifth straight month in October, led by residential building, but its rate of growth eased from September’s record high, according to the Australian Performance of Construction Index (Australian PCI).

Apartment construction led the industry's growth in October.

The seasonally adjusted national composite index compiled by the Australian Industry Group (Ai Group) and the Housing Industry Association (HIA) fell 5.7 points to 53.4. Any number above 50 indicates an expansion in activity, with the distance from 50 indicative of the strength of the expansion.

The group says the slower pace of growth was evident in the sub-indexes of construction activity (down 3.0 points to 54.1), new orders (down 4.7 points to 52.5) and deliveries from suppliers (down 1.9 points to 59.0). This, it adds, led to a "marked easing" in employment growth during the month (down 12.3 points to 50.5).

In the residential building sector apartment building activity expanded at an unchanged 60.4 points, while house building activity kept growing at 57.3 points, but this was down 4.4 points from September.

Commercial construction also grew at a slower rate (down 6.6 points to 51.8), but engineering construction activity contracted for the fourth month in a row (down 1.9 points to 46.4).

"With further growth in October, residential and commercial construction continued to lead the rebalancing of the economy away from the emphasis on mining investment that has been such a feature of domestic economic activity in recent years," Ai group director of public policy Peter Burn says.

"However, the outlook slipped a notch or two last month with the pace of growth in activity and new orders easing in the residential and commercial construction sub-sectors and declining further in engineering construction," he adds.

"With official data showing housing loan approvals flat, construction businesses appear to have wound back the exuberance of recent months with only a marginal lift in employment levels in October."

HIA chief economist Harley Dale sees many positives in the October index performance.

"While the rate of expansion in the Australian PCI slowed in October 2014, this latest update is still a healthy one for Australia’s construction industry," he says. "Three of the four construction sectors — engineering being the predictable exception — registered expansionary readings.

"It seems the case, however, that the activity and new orders indices for both detached houses and apartments are consistent with the maintenance of elevated levels of residential building approvals, rather than further growth."